Moneycontrol PRO
you are here: HomeNewsIndia

FMCG sector to register flat growth in 2020: Nielsen

Earlier, on April 30, in the middle of the lockdown, Nielsen had slashed the growth forecast for the FMCG sector by almost half to 5-6 percent for 2020 citing adverse impact of the coronavirus pandemic.

July 30, 2020 / 06:29 PM IST

India's fast moving consumer goods (FMCG) sector is expected to witness flat growth in 2020 following severe and extended lockdowns, restrictions on manufacturing units, social distancing norms and store closures, according to data analytics firm Nielsen.

Earlier, on April 30, in the middle of the lockdown, Nielsen had slashed the growth forecast for the FMCG sector by almost half to 5-6 percent for 2020 citing adverse impact of the coronavirus pandemic.

Though the FMCG industry has shown some sign of improvements in June, but in the first half of the year (January-June) the industry growth slipped to negative with 6 percent decline.

"Keeping these unprecedented dynamics in the market, Nielsen has revised its outlook and is expecting the year to be in the flat growth range (-) 1 percent to 1 percent for branded FMCG industry in India, as against a 5-6 percent growth projected earlier this year," said Prasun Basu, President, South Asia Zone, Nielsen Global Connect.

This is the second revision of the forecast by Nielsen for 2020, amid coronavirus pandemic and subsequent disruption in the market and supply chain.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

Nielsen had on January 21, projected a 9 to 10 percent growth for the FMCG industry with a 'stable' outlook on the back of favourable macroeconomic factors.

In a virtual conference to discuss FMCG snapshot for Q2, Basu said the June quarter had been the worst for the industry, with a 17 percent decline in sales value as compared to the same quarter of 2019.

He expects the growth witnessed in June to continue into the festive season in Q3 as food categories are expected to see a higher growth and get stronger in Q4.

According to Nielsen, which considers the calendar year for calculating its growth numbers, the second quarter, particularly in June, saw a bounce back in both traditional trade channels and e-commerce.

On the other hand, modern trade saw sales fall further as malls that opened in the Unlock 1.0 faced nominal footfalls. Despite sales reviving to near pre-COVID levels in June, the industry registered a negative growth of around 17 percent in Q2.

Demand for products

Nielsen said the industry has seen a surge in demand for packaged wheat, biscuits and soaps as consumers stayed at home and spent largely on essentials.

Another trend that FMCG industry witnessed was the growth in high-margin premium segment, which is returning back to normalcy after declining during the lockdown.

As per Nielsen, non-food items witnessing a strong recovery during Unlock 1.0 and 2.0 as categories such as personal care and home care grew strongly in June.

Rural outperforms urban

In June, the rural market grew three times all India FMCG growth. Urban India, which accounts for 64 percent of FMCG sales, grew a mere 0.04 percent in June compared to rural, which grew 12.5 percent.

Rural India contributes around 36 to 37 percent of total FMCG sales, a bulk of which is contributed by food items.

"Rural India has been comparatively insulated from COVID-19 so far, however its spread is now reaching the hinterland. Having said that, we do expect an overall positive uptick due to reverse migration," Nielsen said.

Moreover, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) wages are at record high and rural disbursement against the programme is more than double of same period last year, it added.

“Lower number of COVID-19 cases, normal and timely rainfall and several government schemes, including a Rs 40,000 crore increase in allocation of MGNREGA, upskilling of three lakh migrant workers and Rs 1 lakh crore agri infrastructure fund for farmers are some of the factors contributing to the rural growth story for the FMCG industry,” said Sharang Pant, Lead Retail Vertical and RMS, Nielsen Global Connect.

Follow our full coverage of the coronavirus pandemic here.
Himadri Buch
first published: Jul 30, 2020 04:00 pm
ISO 27001 - BSI Assurance Mark